The Euro has recovered quite a bit of ground against the GBP over the course of August but the formation of a triple top could signal a reversal of the Euro’s fortunes.
It is no secret that the EURGBP pair is stuck in a downward sloping channel as the threat of deflation weighs heavily on the Euro. Recently the Euro has bounced off the bottom of the channel and moved up towards the centre of it. The Pound has suffered from some slightly disappointing economic news that culminated in a downgrade of GDP and wage growth forecasts. The Euro benefited from some positive PMI and Unemployment results.
What we are seeing on the H4 chart looks like a triple top that could signal a reversal of the current euro strengthening and a return to the bearish trend. The below chart demonstrates the neck line of the triple top. We can see the price has moved below and is now using it as resistance. The price could reject off this level, confirming the structure, rather than breaking through it, which would invalidate it.
Interestingly, if we extend the neck line back up the channel we can see this line forms the centre of the channel and a line that the price uses as a point of reference. On a number of occasions, the price has touched this line and bounced back off it, so it is no surprise that the centre of the channel is forming the neckline for a triple top.
It would be no surprise if the EURGBP pair looks to bounce off the neckline and head lower. If this is the case a fairly tight stop loss could be set just above the neckline to minimise any losses in the event of an upside breakout. Look for previous levels of support as possible exit points for a short position, such as 0.7937, 0.7920, 0.7887.
A Triple top has formed on the EURGBP H4 chart with the neckline being the centre of the bearish channel. Look for a bounce off this line as the pair resumes the bearish trend.